''The public sector pay premium, compensating differentials and unions:
propensity score matching evidence from Australia, Canada, Great Britain and the United States
''

( 2009, Vol. 29 No.3 )

Propensity score matching is used to estimate the size of the public sector pay premium in four countries. Three sets of matching covariates are used; worker characteristics only, then including job attributes and finally adding union membership. When worker characteristics and job attributes are controlled for, the public sector pay premium ranges from 30% in Canada to 19-20% in Australia and Great Britain and only 6% in the United States. Differences in job attributes between private sector and public sector workers make almost no difference to the estimated pay premium. But once differences in union membership across sectors are controlled for, the estimated public sector pay premium is reduced in all countries and disappears in Canada. This finding favors the hypothesis that the pay premium partially reflects rents accruing to public sector workers, obtained most probably with assistance from the actions of their labor unions.